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Cyprus parliament rejects bailout deal

Mary GearinUpdated
Wed Mar 20 06:37:00 EST 2013

The parliament of Cyprus has overwhelmingly rejected a controversial government bailout deal forced on it by the EU and the International Monetary fund. Cyprus MPs voted 'no' to imposing a tax on bank deposits demanded by international lenders as a condition for a bailout deal. There are reports the government might now try to renegotiate the terms of the deal with the troika of lenders and at the same time find other ways to make up the multi-billion euro shortfall.

Transcript

TONY EASTLEY: In Cyprus parliament has rejected a controversial government bailout deal forced on it by the EU and the International Monetary Fund.

Even though there were last minute changes to the austerity measures proposed by the government they were not enough and parliament resoundingly voted them down.

Local media says the government might now try to renegotiate the terms of the deal with the troika of lenders and at the same time seek other ways of making up a 5.8 billion euro shortfall.

Mary Gearin is our Europe correspondent.

Mary, good morning. Can you tell us more about parliament's reaction to this?

MARY GEARIN: Well Tony, 36 votes against and 19 abstained. And what that means, people think from the voting details, is that the main government MPs did abstain.

They had indicated earlier in the day that that would strengthen their future bargaining position when it came to the creditors. But essentially this is what the people wanted, the thousands of people who have been gathering in Nicosia to protest against the levies.

Just to remind listeners - they were levies on people with less than $125,000 in savings to pay a one-off tax of 6.75 per cent.

Earlier today the government suggested that that would be changed and that people who had about 20,000 euros, about $25,000 in savings, would be exempt from the levy. But that wasn't enough to appease the MPs and it was rejected.

To give some sort of idea of the feeling behind this and the very anti-European sentiment, Professor Athanasios Orphanides, a former governor of the Cypriot central bank, likened this deal to blackmail.

ATHANASIOS ORPHANIDES: We are witnessing historic times. What we're witnessing is the slow death of the European project. We are in a situation where some European governments are essentially taking actions that are telling citizens of other member states that they are not equal under the law.

Mary Gearin is with us. Mary, it's been reported that there are billions of euros held in foreign accounts in Cyprus and a lot of it is Russian money. What's Russia had to say about the latest measure?

MARY GEARIN: Well Russia will be pleased with this outcome. We've heard over the last few days comments from the president and the prime minister calling the deal unfair, unprofessional, dangerous - akin to confiscating other people's money.

Today Russia's envoy to the European Union used unusually strong language, saying that it was like forceful expropriation, and said that it could lead to the collapse of the Cypriot banking system, triggering possible domino effects in the eurozone countries.

TONY EASTLEY: With that in mind, did the austerity measures receive any degree of acceptance in Cyprus? And of course what happens next?

MARY GEARIN: Well it must be said that there was a small group of people who were gathered who wanted to push through the deal, who supported the deal outside parliament, but that was certainly over-run by the number of people who were opposed to it.

On the streets of Nicosia now and across Cyprus there remains uncertainty. No-one knows what this actually means, the collapse of this vote.

The banks will now remain closed. It's unclear whether it's Thursday or Friday that they will open. There will be some restrictions put on how much money people can take out because there is a fear that there will be a run on banks. So that's an indication of the seriousness of the situation.